Good Morning DINKS. We are all working towards our own personal financial goals and for some of us one of those personal goals may include saving for retirement. But what does that really mean? For some people saving for retirement means saving what they can afford to save now and for some people saving for retirement means saving a specific amount now so they will have an exact projected about of money in retirement. Let me ask you a question Dinks, have you ever had a retirement projection plan created for you?
Plan for Retirement with a Retirement Projection
A retirement projection plan takes into consideration our current savings as well as our future savings up until our retirement date and projects how much money we will have accumulated by retirement. This allows us to determine if our current savings will provide the retirement that we have planned. A retirement projection plan also allows us to see if there are any shortfalls in our current savings strategies and if we have to save more now or if we have to adjust (and lower) our retirement goals.
The best way to plan for retirement is know what to expect and know what we are planning for. The average person plans to live off of 70% of their current income during retirement. MSN recently released an article about planning for retirement and people’s expectations in retirement. If we expect but don’t plan for our retirement then our retirement years may end up being a disappointment. My Dad thought that he was going to retire and play Golf 5 days a week. My Dad didn’t plan for the expensive cost of a Country Club membership or the fact that he would need surgery on both of his shoulders.
Do you know where your income will come from during retirement? Many of us have personal retirement savings but that may not be enough. Other sources of retirement income can be Social Security as well as our Employer Pension Plan. However Social Security may only account for up to approximately 35% of our total planned retirement income.
Here are some Facts about Planning for Retirement
A man who retires at 65 should plan for his retirement income to last (as he lives) another 18 years.
A woman who retires at 65 years old should plan for her retirement savings to last for approximately another 21.5 years.
A defined contribution pension plan allows us and our employer to contribute a fixed amount of money with each pay check. However the amount of money that we have at retirement depends on how we invest and therefore it is not guaranteed.
A defined benefit pension plan allows our employer to make contributions on our behalf and our contributions as an employee are voluntary. The amount of money that we will receive monthly during retirement is guaranteed. The calculation formula is based on the number of years that we worked for our employer as well as our annual salary.
Do you have a Pension Plan with your Employer?
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Kristina Tahnyak
Tahnya is a Certified Financial Planner and former Investment Advisor turned marketing and communications professional She holds a degree from Concordia University, is debt free and currently works in the field of digital marketing.
No pension plan here. Us entrepreneurs have to do things a little differently.
I’m sad because I don’t have a pension plan. But I opened an RRSP this month, so I’m going to start slowly socking away money. Since I’m only 23, at least I’ll have time on my side – I want to be able to travel and have fun when I retire so it’s important to me to have enough money for that.
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